Current Issue / DU Alumni

Aviva VP offers retirement planning advice

Q: I’m changing employers. What do I do with my money in the qualified plan?

A: The Bureau of Labor Statistics shows that the average person changes jobs more than three times during their lifetime (not including all of those jobs you held while going to school). That would explain why so many clients I speak with ask this question. There is no easy answer, but there are several options to consider when making your decision:

• You may leave the money in your previous employer’s plan. (If you have less than $5,000, the employer may force a distribution.)
• You may transfer the money into an IRA.
• If your new employer’s plan allows it, you may transfer the money into their plan.
• You may take a distribution from the plan, pay taxes (and a penalty if you are under 59 ½ years of age) and spend or reinvest the money as you please.
• Or, you can mix and match the previous four choices (take a distribution of part and transfer part).

Which option is right for you? There is no secret formula, but there are some important questions that may help you make the correct decision:

• What investment options are available under the various plans or IRAs? Look for a plan that gives you multiple options and flexibility.
• What options are available to your beneficiary after your death? If your beneficiary is not your spouse, many plans require the beneficiary to take lump sum or rapid distributions. Look for a plan or IRA that allows beneficiaries to stretch out payments over their life expectancy.
• What are the expenses and fees associated with each plan? Higher expenses and fees aren’t always bad, especially if those fees are outweighed by better investment performance. Weigh the fees and charges in relation to historical and expected returns.
• Does the plan have advisers who can help you understand your investment options and make the correct choices? Typically, once you leave an employer, you lose access to the plan advisers. If you need assistance in making investment choices, then moving to a new plan may be your best option.

Do your homework and don’t rush your decision. If you enlist a financial adviser to help you make the decision, choose one who helps you make the best decision based on your objectives, not on the commission earned.

Chuck Van Devander (JD ’95, LLM ’97) is a senior vice president of Aviva USA—a leading life insurance and annuity company. Prior, Chuck was with New York Life and ING. He is a frequent speaker on life insurance, estate planning, split dollar, income taxation, litigation awareness and ethics. Chuck, his wife and two children reside in Urbandale, Iowa.

Leave a Reply

Your email address will not be published. Required fields are marked *